ND House rejects oil tax restructuring measure

BISMARCK – House legislators Wednesday rejected an oil tax reform bill that would have lowered the oil extraction tax, closed a tax loophole for low-producing wells and set up guidelines for a new tribal tax agreement.

Rep. David Drovdal, R-Arnegard, said the conference committee met 17 times to reach a compromise on House Bill 1234, which aimed to reform several oil tax provisions while staying close to revenue neutral for the state. The bill failed 71-21.

The bill would have increased taxes on the oil and gas industry by $65 million but would have resulted in a $9.9 million loss in revenue to the state of North Dakota because more tax dollars would go to the Three Affiliated Tribes, Drovdal said.

Rep. Scot Kelsh, D-Fargo, said the bill had some good provisions, but reducing the oil extraction tax from 6.5 to 6 percent was a deal-breaker.

Earlier Wednesday, Democrats called the proposal, which would have applied to new oil production, a “thoughtless, unnecessary shortchanging of North Dakota’s future” that would cost the state

$280 million in the first four years.

“The industry is flourishing under that current tax rate,” Kelsh said. “As the industry grows, the need for infrastructure continues to grow.”

Other legislators who voted against the bill had concerns about the guidelines it established for a new agreement with the Three Affiliated Tribes that would equally divide oil taxes generated on the Fort Berthold Reservation between the tribes and the state.

No one spoke in opposition to dividing the tax revenues equally, but several said they wanted more assurance that the tribes would spend the new dollars on roads and infrastructure. The bill requires the Three Affiliated Tribes to report how the money is spent but does not have any other requirements.

Rep. Mark Dosch, R-Bismarck, called it “a shame” that tribal leaders will not commit to spending the money on infrastructure and said he opposed the bill.

Others said it’s wrong for state legislators to tell a sovereign nation how to spend its money.

Drovdal said he received a lot of emails from oil companies working on the reservation who supported the bill.

The oil companies “absolutely need this bill to pass,” Drovdal said.

If a new agreement with the tribe is not reached, tribal leaders have indicated they could break the existing agreement and charge a tax on top of the state’s tax, making it too costly for companies to drill on the reservation.